Research on the Factors of Trade Growth between China and India —An Empirical Analysis Based on Constant Market Share Model

Based on 2000-2011 trade data, this paper decomposes the trade growth factors between China and India by using Constant Market Share model (CMS). The conclusion shows that scale effect is always a major factor; the scale effect of the exports growth from China to India is manifested in the industrial finished or semi-finished products, and the competitive effect of primary products is even more significant; however, the growth of economies of scale of Indian exports to China mainly concentrates on primary products, and the competitive effect is the main factor that is restricting the growth of primary products exports, while the competitive effects of industrial finished products increase export. Adjusting the trade structure in order to meet the changes of import demand is an important means to enhance the competitiveness of export products and expand the scale of bilateral trade development. In addition, China and India Free Trade Agreement strategy should be put on the agenda, and the economic integration mechanism should be actively built.